What is the Hidden Cost of Liability Insurance?

Liability Coverage to Cover DamageLiability insurance is the coverage of an auto policy that protects a person in the event of an at-fault accident. When a person has hit another person’s car they are liable under the law to fully rectify and pay for all damages to the person’s property and any medical bills that are directly related to the accident. Insurance is a means that allows the at-fault party to pay for their responsibility to the other person.

Liability insurance amounts are usually listed as 100/300/100. This means that the policy will pay up to $100,000 per person for a total of $300,000 per accident and the policy will pay up to $100,000 for all property damage. The hidden cost of liability insurance is not the cost of carrying such coverage’s but rather the cost to you if your insurance is not enough to pay for the damages to the other party.

Suppose for a moment that a policy has limits of 15/30/10 and there is an accident that totals the car and puts the driver in the hospital for a week. The limits of liability will pay $15,000 per person up to a maximum of $30,000 for the accident. If the person’s hospital bill comes out to be $100,000, the at-fault party will have to come up with the difference from what the insurance policy paid and what is left to satisfy the hospital bill. That leaves $70,000 that you will have to pay out of pocket. In most cases the at-fault party will end up being sued and forced to pay the remainder of the balance. This will destroy their financial status for years to come.

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